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Cuomo plans non-Indian casino in Falls

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“We’re not going to violate any contracts that are in good standing,” said Gov. Andrew M. Cuomo recently in response to a question about putting a casino in Western New York. Derek Gee/Buffalo News file photo

ALBANY – The Cuomo administration, frustrated with its long-standing financial dispute with the Seneca Nation and seeking more lucrative gambling revenues, will propose a new, non-Indian casino for downtown Niagara Falls.

Gov. Andrew M. Cuomo’s move sets in motion either an effort to jump-start stalled talks over the more than $500 million in lapsed casino revenue-sharing payments or an attempt to bring direct, non-Indian competition to the tribe’s exclusive gambling empire in Western New York.

The governor has said he wanted to add three non-Indian casinos to upstate, but he now is preparing to increase the casino expansion to four facilities and, for the first time, he is specifically identifying one of those sites: Niagara Falls, according to an administration official speaking to The Buffalo News on condition of anonymity.

For the casino plan to get the green light, Cuomo needs the newly created state Gaming Commission – which he controls – to determine that the 2002 casino compact between the Senecas and New York has been breached.

Significantly, the Cuomo administration believes “ending the Indian monopoly would be an economic benefit” to the state and localities.

The administration official noted that the Senecas – “when they pay” – will share 25 percent of their slot machine revenues with the state and localities.

But non-Indian casino operators, if the current revenue-sharing model at nine racetrack-based casinos is followed, could end up paying triple what the Senecas are supposed to pay.

The Senecas haven’t paid anything in recent years, saying that the state violated the compact by allowing casino-style gambling at Hamburg and Batavia.

That the administration has worked out numbers to show that the state and localities can make more in revenue sharing with a non-Indian casino indicates the seriousness of the proposal.

Where in Niagara Falls a non-Indian casino might go is uncertain, since the Cuomo plan is at an early stage and there are many possible legal, financial and political twists that could take place.

Certainly, one possible player is Howard Milstein. He is the Manhattan billionaire banker who owns 80 acres of land in downtown Niagara Falls that have been sitting mostly idle.

Milstein also is chairman of the state Thruway Authority, and he was appointed by Cuomo.

It is uncertain when the governor will formally unveil his proposal, but it likely would have to be in budget amendments he will make in two weeks to the 2013 state budget he shared in January.

The governor has said his plan to locate three – and now four – casinos upstate is a major part of his administration’s goal to improve parts of the upstate region’s economy. He believes New York City residents, and some of the 50 million tourists each year to that city, can be lured upstate by “destination” casino resorts, complete with full-scale Las Vegas casino projects and rounded out with hotels, restaurants, entertainment and shopping components.

The idea comes as state and local officials have been trying to figure out ways to improve the economy of Niagara Falls, which for years has looked across the border to the real estate boom on the Canadian side of the falls.

It is worth noting, though, that the Canadians have considered curtailing casino operations in Niagara Falls, Ont. A report last year called for plans for a new casino in the greater Toronto region and a possible reduction or relocation of casinos from shrinking markets such as Niagara Falls, Ont.

Over the past decade, profits from Canadian gambling facilities close to the U.S. border have dropped from $800 million to $100 million, and resort-casinos alone have declined by more than $600 million.

On the U.S. side of the border, the Seneca Nation has stopped making its annual revenue-sharing payments, which have now run up to a tab of more than $500 million. A quarter of that was supposed to be shared with the three local host cities where the tribe operates casinos: Niagara Falls, Buffalo and Salamanca.

The funding dispute between Albany and the tribe has severely affected those cities’ budgets, especially in Niagara Falls and Salamanca, where jobs and services have been cut in the past couple years.

The amount of money the tribe owes to the state would, if paid today, wipe out more than one-third of New York State’s budget deficit for the 2013 fiscal year.

The tribe and then-Gov. George E. Pataki in 2002 signed a nearly 600-page agreement, under the federal Indian Gaming Regulatory Act, for the Senecas to operate three casinos in Western New York. In return for a share of casinos’ slot machine proceeds, the state gave the Senecas a large casino exclusivity zone – from Route 14, which runs east of Rochester from Lake Ontario to the Pennsylvania line, all the way to the western reaches of the state.

The 2002 compact’s life span was 14 years, with an automatic renewal for an additional seven years if neither side objected.

For the compact to end early, one of three conditions must met. One of those conditions is either side committing a “material breach” to the terms of the deal.

The tribe stopped paying the state a few years ago when, it declared, the state violated the compact’s terms. It cited as compact breaches the expanded gambling offerings at three racetrack-based casinos in Western New York – in Batavia, Hamburg and Farmington. The matter went to arbitration late last year.

Cuomo’s new plan comes a few weeks after the governor suggested no casino would be in the mix for Western New York. But he left some wiggle room in early January, saying that the state would honor legal agreements “in good standing.”

Would he oppose any new casinos in Western New York as part of his gambling expansion package?

“We’re not going to violate any contracts that are in good standing, so you’d have to look at the contract,” Cuomo responded during a session with reporters at the Capitol last month. “If it says there’s an exclusivity geographically, then we’re not going to violate any contract that’s in good standing.”

While state lawmakers are eyeing second passage this session of a resolution to amend the state constitution permitting up to seven casinos on non-Indian lands, a separate “enabling” bill remains to be negotiated that would spell out some of the details of the expansion.

In his 2013 budget, Cuomo proposed a “first phase” of the casino development that would limit the new gambling halls to upstate. He has defined upstate as the areas north of metropolitan New York, but he has not detailed precisely where they may be. Cuomo has, however, hinted at new casinos possibly in the Albany area, the Finger Lakes, the Catskills and the Adirondacks.

The administration is walking a fine line with Cuomo’s proposal for a non-Indian casino in Niagara Falls.

While it believes that a non-Indian casino could bring more money to both the state and the localities, it also does not want to jeopardize the jobs associated with the current Seneca casino operation in Niagara Falls.

But with casinos across the border in Canada, the administration apparently believes there could be enough business – especially with additional development opportunities in Niagara Falls – for both the Senecas and a non-Indian developer to succeed.

Under the new Cuomo plan, the Gaming Commission would decide whether the compact between the Senecas and the state has been breached. The commission, created last year by merging the operations of the state Lottery Division and the Racing and Wagering Board, was legally activated Friday.

A board of directors has not yet been appointed, but five of the seven members will be named by Cuomo – and therefore would likely be loyal to the governor’s administration.

The casino expansion will come to a head this legislative session. Lawmakers last year approved a resolution permitting up to seven full-blown casinos, complete with table games and slot machines instead of the video slot machine devices now at the nine racetracks controlled by the lottery division of the new Gaming Com- mission.

Lawmakers this session are being asked to approve the same resolution, as well as a bill outlining various specifics, such as possible host counties for the casino developers and the process for how sites will be selected.

If all that happens, voters this November will be asked to approve or reject the expansion in a statewide referendum.